The Walsh-Healey Public Contracts Act requires contractors engaged in the manufacturing or furnishing of materials, supplies, articles, or equipment government of America or the District of Columbia to pay employees who produce, assemble, handle or ship goods under contracts that exceed $10,000 the federal minimum wage for all the hours worked and time and a half their regular rate of pay for all over time past the 40 hour work week. This act is enforced by Employment Standards Administration’s Wage and Hour Division within the U.S. Department of Labor.

This contract applies to all contractors or employers who enter into contracts with the government for the manufacturing or furnishing of materials etc. in excess of $10,000. The act makes prime contractors liable if subcontractors violate the Act.

Although the Act does not apply to employees who are exempt from the minimum wage and overtime requirements under the Fair Labor Standards due to their employment in a bona fide executive, administrative, professional or outside salespersons capacity, a contractor must still pay these employees an overtime rate for all time worked over a 12 hour work day and/or 56 hour work week. If and when an employer fails to do so, they must pay the exempt employee an overtime rate for ALL hours over 40 in a given work week.

When employers/contractors violate the Act, they’re subject to such severe penalties as being debarred from future government contracts for at least three years (worst case scenario).

Contractors subject to the Act must keep the following records for three years:

Do Your Employee’s Wages Violate the Law? (More on the SCA)

The Service Contract Act is a legal mandate for specific wage and benefit rates that workers MUST be paid by their employers. Huge fines can result for the employer who doesn’t follow this mandate.

Any employers in the management, building, property or equipment service, or food service industries who contract with the government must comply with the SCA. Recently, the SCA has included security services, though health care services are still exempt.

Based on an employee’s job classification, the SCA requires them to be paid certain wages. Additionally, businesses covered by the SCA need to provide their employees with certain benefits that are also based on their classification. These benefits include: medical, surgical or hospital care, training, death, disability, pension, unemployment, as well as vacation and holiday and personal leave.

Say an employee protected by the SCA goes from a minimum wage of $8.25 to $10.14 due to the SCA; he or she also must be paid benefits at a rate of $3.05 per hour. If the law does not specify an exact benefit amount, the employee is entitled to a default rate of 30% of that wage. There are three different ways this benefit can be paid. It can be paid as direct payment to the employee, payment to buy insurance in the equivalent amount or by implementing an employee benefit fund. Benefits already required under state law such as worker’s compensation, unemployment or social security do not fall under the 30% surcharge according to the DOL( Department of Labor).

Employers can be fined thousands of dollars for each violation. In addition to penalties, employers may also be responsible for back wages and interest payments to workers who have been underpaid.

Employees who keep accurate records of SCA compliance lower the risk of fines and penalties greatly. SCA covered employers have to submit annual certified payrolls to the DOL. An employer who can’t produce these records can be fined up to $200 a day.

When entering into a contract, see if it contains language submitting it to the SCA. These are known as Successor contracts and place the same requirements on the business. The concern for employers entering into successor contracts are that the wage rate schedule can change as it’s project specific. Be sure to obtain all wage rate information and review it before contracting with someone/place that is already contracted with the state.

The burdens of the SCA can be alleviated for employers or their successors who are already covered by a collective bargaining agreement. If you are covered by a CBA, you are excused from prevailing wage and benefit rates.

It can be hard to determine if a contract is covered by the SCA. To navigate the waters of the DOL, Fringe Consulting can help.

Six Ways the Affordable Care Act Could Cost Federal Contractors More

The impending health insurance reform leaves federal contractors facing major cost increases. President Obama signed the Patient Protection and Affordable Care Act (PPACA or Act) into law on March 23, 2010. Besides the politics surrounding the law, the Act raises cost and compliance implications for federal contractors significantly. Many federal contractors are unaware of the impending changes and costs that are about to happen due to the Act. Enrollment in exchanges are set to begin October 2013 and key provisions of the Act become effective in January 2014 all following affirmation of the Supreme Court. It is certainly time for federal contractors to set their minds on how all this change could affect their bottom line. Following, are six ways the Act could increase costs for federal contractors and ways they can prepare for the impact said expenses will have.

1) The Act’s health care obligations include new requirements on individuals, employers and health plans, and restructures the private health insurance market, setting minimum standards for health insurance. It also provides financial assistance to some individuals. Before the October 2013 date and exchange enrollment, employers are required to provide formal notice to employees that the exchanges are available. Following this time, cost implications will be close behind and it’s important for federal contractors with slim margins and tight budget constraints to assess what it will take for them to comply.

2) Potential Cost impacts include play or pay penalties for employers. Employers need to either provide affordable health insurance that is valuable or pay a penalty. Therefore, they either “play” along with the set Act OR “pay” a penalty. Employers must be aware of their employees eligibility for tax credits and must carefully assess whether their firm is considered large. Because if their firm is considered large, they can be subject to monthly fees or penalties.

3)Traditionally full time employees are considered those who work 40 hours a week.The Act describes them as working 30 plus hours a week. The new definition of part time workers is a major change in the breakpoint for employee benefits coverage. This change could significantly alter federal contractors’ insurance costs and in turn generate increased overhead costs, ultimately affecting the employer’s competitive pricing strategies.

4) Another impact will be excess health benefits or “Cadillac” tax.The Act will also penalize high cost benefit plans. Many within the insurance industry refer to this as the Cadillac tax.

5) Contractors with Service Contract Act (SCA) employees face even more dramatic consequences under the Act than those above. Prevailing wage determinations dictate that SCA employers can offer SCA employees benefits as fringe dollars. Starting in January 2014, the Act eliminates this simple way for employers to comply with the SCA and establishes the more complicated regime under which large employers have to provide an “affordable plan meeting minimum value” for their employees or face big penalties.

6) Employers face potential costs under the exchange system. The exchanges are partly intended to keep health care costs down but they may also subject employers to additional business and administrative costs.

Real Pros Know the Value of Hiring Expertise!

When it comes to landing government contracts for the first time, many small business owners feel a bit like Captain Kirk when he left earth for outer space, “going where no man has gone before.” The truth is, there are people who know the ins and outs of government contract compliance and smart people consult them before their names and reputation go on the dotted line.

Why? All government contractors must prove that their contract workers receive comparable wages to salaried workers before the contracts can be validated. The rules are dictated by Davis-Bacon laws that attempt to safe guard prevailing wages for workers. It is a bit complicated, but with some solid coaching, you will be landing those lucrative government contracts in no time!

Fringe Consulting doesn’t deal with Area 51 and space aliens, they deal with employee fringe benefit programs that not only keep you compliant with federal regulations, it can actually provide your contract laborers with a better return on their retirement using programs are tax-deferred or sheltered.

What does that mean to you? As a small business owner you already know how expensive it is to hold on to quality workers when the jobs thin out. With a contract labor force, “you can make hay while the sun shines” then rest easy during those inconvenient lulls that even the best businesses must endure.

Fringe Consulting specializes in helping businesses create competitive and attractive benefits packages that can help your best laborers stay loyal to you! That gives your work force a competitive edge over fly by night firms that have to rebuild a labor force every time they land a new contract. The stronger your team, the safer your bottom line.

Businesses that use Fringe Consulting see their services as an insurance policy against costly litigation that arises from ignorance of the law on an ever changing landscape. The pros at Fringe Consulting stay up to date on the law and that means you can stay up to date on the things that keep your business making money when others lose their shirts.

Think of it this way, some people content themselves to save a few bucks on the tools they depend on most only to spend more time and money fixing problems later. When you work with Fringe Consulting, you get a proven product and the peace of mind that comes from knowing that you won’t have to deal with red tape when you should be getting your job done!

No matter how you look at it, using a team like Fringe Consulting keeps you doing what you do best because they always do their best to keep you compliant with government regulations. That means you have more time to spend building successful bids that keep your teams moving when others are sending their workers home.

Sound good? Give these guys a call. They know their business and that means you can spend more time doing what you know, working hard and earning a good living! Call Fringe Consulting today!

Definitioner

Wage rates based on data from DoL surveys and other information that generally reflect an average rate paid to certain employee classifications within a specific geographical location.

Job

A detailed description of the work performed by each worker classification listed on an SCA WD, as defined in DoL's Service Contract Act Directory of Occupations. (See www.wdol.gov Library Page for a link to this document.)

Contract

A mutually-binding agreement or document between two or more parties. Federal contracting agencies may award contracts to private-sector companies (or other entities) for the purpose of acquiring goods, services, or construction at an agreed-upon price.